First-time claims for unemployment insurance last week fell below 1 million for the first time since March 21 in a sign that the labor market is continuing its recovery from the coronavirus pandemic.
The total claims of 963,000 for the week ended Aug. 8 were well below the estimate of 1.1 million from economists surveyed by Dow Jones. That represented a decline of 228,000 from the previous week's total.
Jobless claims had totaled above 1 million for 20 consecutive weeks as the U.S. economy went into lockdown to contain Covid-19. The last time the total was below that number was March 14, with 282,000, just as the pandemic declaration first hit.
While the sub-1 million reading marks a milestone, there's still plenty of work to do for the job market to get back to normal. Those collecting benefits for at least two weeks, known as continuing claims, totaled nearly 15.5 million, a decrease of 604,000 from a week ago, but still well above pre-pandemic levels.
"The labor market continues to improve, but unemployment remains a huge problem for the U.S. economy," wrote Gus Faucher, chief economist at PNC Financial Services. "The number of people filing for unemployment insurance, both regular and PUA benefits, continues to steadily decline as layoffs abate. But job losses remain extremely elevated, far above their pre-pandemic level."
Markets cut losses following the report, and Wall Street indicated a flat open for stocks. Equities were little changed in midmorning trading.
The total marks the second week of declines since a provision expired July 31 that gave unemployment insurance recipients an extra $600 a week on top of their normal compensation. Congressional leaders are debating an extension as President Donald Trump issued an executive order that would provide an extra $400.
The decline "provides some fuel for the argument that the enhanced benefits were providing an incentive for people to stay away from returning to work if they had the option," Jefferies said in a note. "The data of the past two weeks will not help the arguments of lawmakers fighting to extend the expired benefits."
The total number of Americans receiving unemployment benefits fell sharply for the week ended July 25, down more than 3 million to 28.26 million, also pointing to a downward trend in joblessness. A year ago, that number was 1.7 million.
Those receiving benefits under the Pandemic Unemployment Assistance program totaled 488,622, a decline of 167,377 from a week ago. The program provides compensation to those who normally wouldn't be eligible for benefits such as independent contractors.
At the state level, the biggest drops in claims came from Florida (-23,180), New York (-21,905) and Texas (-11,233), according to numbers not adjusted for seasonality. The unadjusted total was 831,856, a decrease of 156,453. Some economists say the unadjusted number is more relevant as the current circumstances surrounding the pandemic are not subject to seasonality.
The report comes as the U.S. has recovered about half the jobs it lost during the Covid-19 closures, according to a recent nonfarm payrolls report. July saw a gain of about 1.8 million, bringing the unemployment rate down to 10.2%.
However, that remains well above the pre-pandemic level of 3.5%, which was the lowest in 50 years.